“THE EMERGENCE OF PREDICTION MARKETS WITHIN BUSINESS FIRMS: A SKEPTICAL PERSPECTIVE FROM AN INTRIGUED ACADEMIC.”

Abstract

Learning about the recent emergence of prediction markets within business firms has been fascinating and a bit confusing. As an economist who works on historical political stock markets, I believe this intriguing endeavor will be a road worth traveling but one littered with potholes and rocks at unexpected places.  Perhaps my sense that employing prediction markets within firms will be a jarring experience comes from the impression formed by my first exposure to the idea: where higher-ups at Microsoft created a small-stakes market for the programming team designing internal-company software about whether their project manager’s deadline would be met.  I could readily see why the higher-ups wanted this insider information, but creating such a market seemed entirely at odds with employing hierarchal authority (bosses) or scheduling plans (artificial deadlines) in the first place.  Perhaps this sense that prediction markets and business firms do not naturally coexist comes from my professional training.